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To challenge or to review – that is the question

The High Court recently had to consider the above question in the case of Newlyn PLC and London Borough of Waltham Forest[1] which related to a procurement challenge brought by Newlyn PLC (Newlyn) against London Borough of Waltham Forest (LBWF).

Background

Newlyn provided a collection and enforcement service to LBWF relating to council tax and business rates. As part of the contract, Newlyn was entitled to retain the monies it recovered from the enforcement services provided.

When the contract was due to expire, LBWF carried out a procurement process for a new contract. The tender documents made several references to the Public Contracts Regulations 2015 and Newlyn submitted a tender for the new contract.

Following the completion of the evaluation of bids, Newlyn was informed that it had been unsuccessful. Unhappy with the result, Newlyn issued a claim in the High Court alleging various breaches of the Public Contracts Regulations 2015 (the PCR). LBWF then issued an application to strike out the claim on the basis that the claim was misconceived because the PCR did not apply.

Issues for the Court

1. Did the PCR apply to the procurement?

2. If not, what did this mean for Newlyn's claim?

3. Is Newlyn's claim more than fanciful or better than arguable?

The Judgment

The application was heard by Mr Justice Coulson.

In respect of the first issue, Mr Justice Coulson decided that the PCR did not apply to the procurement because the contract was a "service concession contract" which is excluded from the PCR by Regulation 117. A service concession contract is defined by Regulation 2(1) of the 2006 Regulations as being "a public services contract under which a consideration given by the contracting authority consists of or includes the right to exploit the service or services to be provided under the contract (emphasis added)."

He also considered the 2012 case of JBW Group Ltd v Ministry of Justice[2] which decided that the provision of enforcement services to magistrates courts by a contractor fell outside the PCR on the basis that it was a service concession contract because the contractor enjoyed a right to exploit the service because part of the sums it recovered were retained by the contractor and counted towards its profit. Mr Justice Coulson held that the services provided by the contractor in that case were analogous to those in the case before him and accordingly the services that were being procured by LBWF were excluded from the PCR.

In terms of the second issue, it therefore followed that Newlyn's claim was fatally affected because it was based solely upon breaches of the PCR.

Whilst Newlyn argued that the claim should proceed on the basis that it had a legitimate expectation that the PCR would govern the procurement exercise and/or it should be permitted to amend its claim to bring a claim for judicial review, Mr Justice Coulson did not agree. He held, having considered several cases on this issue, that unless there were exceptional grounds, generally the court could not and should not turn a claim started by way of Part 7 of the CPR (ie the way in which the challenge was brought in this case and generally, the way in which most claims are brought) into a claim for judicial review.

However, Mr Justice Coulson went on to consider what Newlyn's position would be on the assumption that the claim could be amended and pursued as a judicial review claim. Mr Justice Coulson considered the arguments put forward by Newlyn that a judicial review claim could be established on the basis that either (i) it had a legitimate expectation that LBWF would carry out the procurement on the basis of the PCR or (ii) there had been irrationality in LBWF's decision based on Wednesbury principles.

Mr Justice Coulson held that there was no arguable case on legitimate expectation as, whilst there had been references to the PCR in the tender documents, he considered them to be "stray" references and that they did not amount to a representation to Newlyn that was "clear unambiguous and devoid of relevant qualification", nor was there any evidence of detrimental reliance. In relation to (ii), Mr Justice Coulson confirmed that on the basis of the allegations made, Newlyn was not close to being able to establish irrationality.

Comment and analysis

Given the recent implementation of the Concession Contracts Regulations 2016[3], it is unlikely that this case will be of significant importance going forward because contracting authorities will have to decide at an early stage which of the Regulations will apply to the procurement they are undertaking.

What is interesting about this case is the Court's refusal to allow Newlyn to amend the claim to bring a judicial review of LBWF's decision. There are many cases in which the courts have previously held that they would be flexible in the choice of forum and would not allow procedural matters such as the choice of court, to affect a meritous claim[4].

Whilst it seems reasonably clear that Newlyn's case, as pleaded, did not give significant grounds for challenging LBWF's decision, the claim is likely to have been pleaded at an early stage and without Newlyn having had the benefit of seeing LBWF's disclosure. As is so often the case in procurement challenges, a claim has to be issued at a very early stage given the 30-day limitation period and there is usually very little time to compel a contracting authority to provide all of the documents that would be discloseable in the proceedings. Particulars of claim often reserve the ability of the Claimant to plead further breaches following disclosure. It therefore seems harsh that the Court did not permit Newlyn the opportunity to explore this avenue further given the unique issues that can arise in procurement challenges.

Whether this case represents the start of a more rigid approach by the judiciary to choice of forum issues, remains to be seen.

About the Author

Joanne is a Senior Associate in the Cardiff Litigation and Dispute Resolution Team with extensive experience of advising private, public and education sector clients on a wide range of commercial and corporate disputes, including procurement challenges, judicial reviews, breaches of contract, negligence, nuisance, defamation and breaches of confidence and non-compete/restrictive covenant clauses.

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